Metalworking Index Turns Expansionary After 6-Month Slump

The Gardner Business Index (GBI): Metalworking began 2020 with a reading of 50.2 — its first expansionary reading since June 2019. Index readings above 50 indicate expanding activity while values below 50 indicate contracting activity. The further away a reading is from 50, the greater the magnitude of change in business activity. Gardner Intelligence’s review of the underlying index components observed that the Index, which is calculated as an average of its components, was supported by an expansion in production and new orders. No change in export activity and contractionary readings for supplier deliveries, employment and backlogs held the Index back, yet most components moved several points higher during the month. In fact, backlogs saw a seven-point increase while remaining below 50.

This decelerating contraction in backlog activity was welcomed news after reporting accelerating contraction since 2016. January’s expansion in both production and total new order activity coupled with no change in exports activity and a sharply slowing contraction in backlogs implied that domestic demand expanded and that metalworking manufacturers greatly slowed the pace at which they reduced their backlog levels.

January’s results indicated that firms of all size categories reported improved month-over-month readings for the first time since mid-2018. Large firms in excess of 250 employees reported accelerating business activity for a 37^th consecutive month. Firms of all other sizes reported slowing deceleration in business activity during January with firms between 100-250 employees reporting the smallest amount of deceleration. In contrast, firms with fewer than 50 employees reported the most challenging business conditions.